Nathaneal Solomon, the MD of Citihomes, a subsidiary of DLM Capital Group, in this interview with BusinessDay’s Abubakar Ibrahim, speaks about solar adoption in Nigeria, challenges and solutions, financial constraints, the company’s product and how clean energy loans can bridge the acceleration gap. Excerpts:
What inspired Citihomes to develop the Term Loan and Clean Energy Loan products?
When we started, Citihomes was doing only corporate loans. But the idea was that we changed our business model. When I came on board, we also needed to play in the retail space. That was what brought about the term ‘loan’. So, we needed to create a product that would touch the retail clients.
Many clients came to us, saying, “Can I access a loan from your firm?” And we were like, “Okay, this was a market that we were not taking advantage of.” So, immediately after I came on board, that was the first thing we had to do.
We needed to create a product that would reach out to that market and the energy space because we noticed that green energy was a market that even the federal government was focusing on. So, based on that, we decided to create a clean energy product.
We also wanted to tap into that market because that alone was a bigger market. We had the clients themselves, who needed solar installation solutions, which then led us to bring on installers, people who would also install these products.
We just noticed this was like a whole chain, and we were not even in that space. Those were the things that prompted the creation of the product.
Citihomes emphasises less documentation and competitive pricing. How does this simplify the application process compared to traditional loans?
For typical traditional loans, they will ask you for many documents, including your payslip and a bank statement. They would also need an introduction letter from your firm to ascertain that you’re working. They also ask you for post-dated cheques.
So we simplified this. Yes, we will ask you for payslips to verify that you’re working. The next thing we need is your BVN. We also need you to fill out an application form.
We made the documentation simpler and not too cumbersome. One of the things we leverage is that with the BVN, we will assess the various credit rules to ensure that this person is not a debtor. Once that’s done, we can deduce your capacity and basic salary from your payslip.
The first step is for you to talk to our installer. Once the installer ascertains which bandwidth you want, he prepares an invoice and forwards it to us. Once we get that invoice, we reach out to the client and say, “Okay, we just got a request in your name.”
Then, we’ll proceed to prepare our own offer letter, which will include the amount, which we already have from the invoice, and the tenure. We decided to make it 24 months to make it easier for any of our subscribers to repay.
We looked at it this way: if we tell you to pay a loan, let’s say within 12 months, most people will have difficulties paying. But you won’t feel that hot if we stretch it to two years, and you’re paying it as little as N2,000 or N3,000. That was why we did a 24-month turnoff for those facilities.
What are Citihomes’ steps to safeguard borrowers and lenders, particularly with collateral requirements for loans up to N5 million?
We, the lenders, decided that a 20 percent or 30 percent equity contribution was needed to reduce our own risk of exposure. So, you pay us the 20 percent, we’ll fund the rest, and we’ll proceed to repayment. Now we ask for a personal guarantor.
So, the personal guarantor is more like a backup, meaning that if, at some point, the borrower defaults, the personal guarantor can stand in for the borrower. That was our criterion to minimise the risk exposure and also defaults.
Then we also went ahead and did something else: There’s also credit life insurance. Should, maybe, God forbid, the person die or lose his or her job, we would now call in the insurance. The basic reason we did that was to reduce the default rate and our own risk of exposure.
How practical is the clean energy loan for individuals and businesses?
One key aspect of the clean energy loan is that we know that the clean energy solution itself is needed in almost every home. Why is it needed? Over the years, it’s been proven that it reduces the cost of electricity considerably.
So, for a business, for instance, let’s even use this facility. We pay about a million plus for diesel costs. With that, it reduces our cost by half – the clean energy solution reduces the price by half. So if it does that to our business, you can tell that any other business across the country will reduce their electricity bill by a considerable amount.
Then you go to the homes. We don’t need to start talking about the enormous costs one pays for electricity bills. So, imagine having a solar solution in your house. It reduces your cost considerably.
That’s one of the things that drove us to create this solution. Surprisingly, immediately after we did it, many companies came to us to say, “We want to partner with you to push this or drive this to as many Nigerians as we can.”
So, first and foremost, costs are going down. Disposable income and the rest are going down considerably. Then, to a large extent, it is also measurable. The maintenance cost is also very low.
We also have the issue of meters not being available for almost everybody. You now need to pay exorbitant amounts to access the meter itself. That was one of the things that pushed us to say, “Okay, we need to have this in the market.”
The Clean Energy Loan promotes solar energy solutions. How does Citihomes ensure access to approved energy vendors and quality installations?
Citihomes vetted and approved the energy vendors we onboarded. These vendors were assessed based on years of experience in the clean energy space, reputation, and feedback. We also assessed the various types of equipment.
One criterion was the vendor’s experience in that space, followed by the years of experience and the products that they were using themselves.
Then we were particular about the after-sales maintenance. So we needed someone who didn’t just focus on the installation alone and went. You focus on the whole round of services. After installation, you’re also there to maintain.
We ensured that they registered with us. So, for any subscriber who comes, we will send one of these vendors to you. You will confirm that this installation has been done and that you are satisfied with it before we conclude with the vendor.
What you said are all short-term and mid-term. Are there plans to offer longer tenure for clean energy investments?
Yes, there are, because any business needs to test the waters and see how it goes. We already have policies, criteria, processes, and procedures in place. So, as we go on, we will tweak any apparatus or parameters we have already put in place.
So, there might be situations where we need to extend repayments beyond 24 months. There also might be situations where we say, “Fine,” maybe a client who has come for the first time and wants to come a second time. We can say, “Okay, we can do it for them beyond two years.” So we are very flexible.
Have you planned to expand access to other sectors or demographics, for market women, etc.?
Yeah, there are plans for them. So we’ve been speaking to some other vendors with solar solutions that meet that need. I had a meeting with some shareholders weeks ago in Abuja. We were even discussing how we can extend their solution to the farmers in the North.
There are plans for that. As soon as we’re done with those conversations, we’ll roll them out. But there are plans to meet those middle- and lower-class individuals.
We have that in the works.
Many Nigerians and some industry players have argued that solar or renewable energy cannot replace fossil fuel or grid power. Rather, it should complement it. What do you have to say to that?
One reason many people make such assumptions is that they do not really know what this can do for them. One of the things we’re looking to do is educate Nigerians, basically some of our clients, subscribers, and the likes.
So first and foremost, the first thing we need to do, as an organisation, is educate our subscribers on the need to have this installed in their homes. Give them that much-needed education.
What are some future plans of Citihomes?
We’re looking at other sectors. We already have Cititravels in the works, and we know that is another area we want to enter. In this sector, clients can access facilities, travel, and return.
